An all-new approach tounderstanding and inspiringthe (in)formal connections of an organization
IN THIS DYNAMIC WORK, thought leaders Jon R. Katzenbach, coauthor of the business classic The Wisdom of Teams, and Zia Khan offer an all-new examination of the modern workplace, and how leaders and managers must embrace it for success. Together they reveal how two distinct factions form the bigger picture for how orga-nizations actually work: the more defi ned and visible “formal organization” of a company—the management structure, performance metrics, and formal strategy—and the “informal organiza-tion”—the culture, social networks, and ad hoc communities that spring up naturally and, in an equally vital but different way, can accelerate or hinder an organization’s success.
Through compelling case studies from enterprises around the world (in business, gov-ernment, the nonprofi t sector, and academia)Katzenbach and Khan explore how top-level organizations balance the informal and formal elements of organizations to achieve outstand-ing results. Leading Outside the Lines takes a timeless organizational approach and creates a powerful paradigm-shifting tool set for applying it, showing when you can get the most done by using the informal elements that operate under the radar, and when it is in fact better to use formal processes. Most important, it illustrates how the two can work together to get the best of both. This groundbreaking book also offers self-assessment guidelines for senior leaders, front-line managers, and individual contributors who need to get better performance results.
Insightful leaders and managers at all levels know that to really lead an organization, you cannot rely on formal constructs alone; you have to use the informal elements as well. Using the information and tools outlined in this compelling book, leaders and potential leaders at all levels can tap into the power of the informal to achieve superlative performance and results.
Praise for Leading Outside the Lines“Those of us who have been writing about leadership and organization for years should heave a deep sigh of relief and wonder to read this book. Leading Outside the Lines forces us to review and rethink all the twisty turns, false dichotomies, paradoxes, fuzzy or over-metricized writings—all the confusions we’ve been wrestling with for years—and shapes them into a coherent, useful, and wise perspective. I love this book, and so will anyone with a desire and need to understand the requirements for 21st-century leadership.”
—WARREN BENNIS, Distinguished Professor of Business, University of Southern California, and author, Still Surprised
“If you want to know how work really gets done, read Leading Outside the Lines! It is the best book I have ever read at explaining the difference between what is supposed to be going on—and what is really going on in organizations.”
—MARSHALL GOLDSMITH, author, What Got You Here Won’t Get You There and MOJO
“Katzenbach and Khan’s book is a must-read for leaders who want their teams to shine in terms of performance, innovation, retention, or any other metric of success. I’ve rarely read a book with such an extraordinary collection of fascinating, real-world examples that drive the message home.”
—KEITH FERRAZZI, author, Who’s Got Your Back and Never Eat Alone
“Leading Outside the Lines is a very important and useful book. Through insightful story-telling and years of experience, Katzenbach and Khan provide strategic and tactical advice about how the informal organization can transform your organization, whether it grapples with radical changes in the competitive environment or the inevitable growing pains of moving from start-up to established global enterprise.”
—LINDA A. HILL, Wallace Brett Donham Professor of Business Administration,Harvard Business School
“A must-read for anyone struggling to adapt their organization to new realities. Filled with keen insight about the formal and informal life of organizations, the book offers practical advice on how to blend the two to bring out the best in your organization.”
—RONALD A. WILLIAMS, chairman and CEO, Aetna
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$27.95 U.S. | $33.95 CAN
www.josseybass.com
BUSINESS AND MANAGEMENT
How to Mobilize the (in)Formal Organization,
Energize Your Team, and Get Better Results
l eadingleadingouts ideouts ide
the l inesthe l inesleading outside the linesleading outside the lines
Jon R. Katzenbach Zia Khan coauthor of The Wisdom of Teams
Katzenbach | K
han
Jon R. Katzenbach is a senior vice president of Booz & Company, where he founded the Katzenbach Center. Previously, he was the founder and senior partner of Katzenbach Partners and a former director of McKinsey & Company. He is the author of Why Pride Mat-ters More Than Money, Peak Performance, and coauthor of the seminal book The Wisdom of Teams.
Zia Khan is the vice president of strategy and evaluation at the Rockefeller Foundation and a senior fellow of the Katzenbach Center. He cofounded the Katzenbach Center while a partner at Booz & Company. Previously, he led the Katzenbach Partners San Francisco offi ce and developed many of the fi rm’s hallmarkpractices in strategy, organization design, and culture change.
For more information, please visit www.booz.com/katzenbach_center.
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Praise for Leading Outside the Lines
Leading Outside the Lines is a vibrant book with a compelling
message vital to the success of 21st-century organizations—
the message that informal human relationships, when effectively
integrated with formal structures and systems, can powerfully
propel people forward. It’s a profoundly important idea that all
contemporary leaders must attend to. This book is rich with real-
life examples of organizational turnaround and culture change—
some of the most unique and engaging I’ve ever read—from
actual leaders who tried, failed, learned, and succeeded. Jon
Katzenbach and Zia Khan do a masterful job of weaving together
these intriguing case examples with practical applications and
useful assessment tools. This is a book about doing great work,
making people proud, getting people connected, and living a
values-driven life. It’s a book you need to savor.
—�Jim�Kouzes,�coauthor,�The Leadership Challenge,�and�Dean’s�Executive�Professor�of�Leadership,��Leavey�School�of�Business,�Santa�Clara�University
Leading Outside the Lines is an incredible gift to leaders in all
three sectors—public, private, and social—working to move
beyond the old walls, build the new, flexible, fluid management
systems, and develop leaders of the future determined to build
the organization of the future. This management guidebook
brings the best of formal and informal organizational theory and
experience to leaders at every level, across the enterprise.
—�Frances�Hesselbein,�chairman�and�founding�president,�Leader�to�Leader�Institute,�formerly�the�Peter�F.�Drucker��Foundation�for�Nonprofit�Management
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Katzenbach and Khan demonstrate that you don’t have to choose
between inspiring employees and getting amazing results—the
best organizations do both. With novel perspectives, great stories,
and practical advice they show leaders how to get the best of
both in ways that can transform organizations. This book belongs
in the hands of everyone who refuses to accept business as usual.
—��Chip�Conley,�CEO,�Joie�de�Vivre,�and�author,�Peak
Strategy and hierarchy drive how organizations operate, but so
too do personal networks and intuitive judgments that define
an equally powerful informal world within. Drawing on richly
developed illustrations ranging from the Bushmen of southern
Africa to eBay, the Marine Corps, and Starbucks, Leading Outside
the Lines provides a compelling account of how leaders can
best capitalize on the hidden drivers of organizational life.
—�Michael�Useem,�professor�of�management,�Wharton�School,�University�of�Pennsylvania,�and�author,�The Leadership Moment
The rate of change in our business, and the need to move
information at high speed across organizations, necessitated
an innovative look at organizational structures and management
styles. The ideas in Leading Outside the Lines helped speed and
successfully shape our major change implementations.
—�Stan�Glasgow,�president�and�chief�operation�officer,�Sony�Electronics��Inc.
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leading outside
the linesHow to Mobilize the (in)Formal Organization,
Energize Your Team, and Get Better Results
Jon R. Katzenbach | Zia Khan
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Copyright © 2010 by Booz & Company, Inc., Jon R. Katzenbach, and Zia Khan. All rights reserved.
Published by Jossey-Bass A Wiley Imprint 989 Market Street, San Francisco, CA 94103-1741—www.josseybass.com
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at www.wiley.com/go/permissions.
Readers should be aware that Internet Web sites offered as citations and/or sources for further information may have changed or disappeared between the time this was written and when it is read.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
Jossey-Bass books and products are available through most bookstores. To contact Jossey-Bass directly call our Customer Care Department within the U.S. at 800-956-7739, outside the U.S. at 317-572-3986, or fax 317-572-4002.
Jossey-Bass also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books.
Library of Congress Cataloging-in-Publication Data
Katzenbach, Jon R. Leading outside the lines : how to mobilize the informal organization, energize your team, and get better results / Jon R. Katzenbach, Zia Khan.—1st ed. p. cm. Includes bibliographical references and index. ISBN 978-0-470-58902-1 (cloth) 1. Employee motivation. 2. Leadership. 3. Corporate culture. I. Inayat-Khan, Zia. II. Title. HF5549.5.M63K373 2010 658.4'092—dc22 2010003888
Printed in the United States of Americafirst editionHB Printing 10 9 8 7 6 5 4 3 2 1
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Jon: To Marvin Bower, whose memory never fades
Zia: To my parents for their steadfast love and support
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vii
Introduction:LikeTalkingtoaWall 1
Part One: Using the infOrmal tO enhance the fOrmal
1 TheLogicoftheFormal;theMagicoftheInformal 13
2 WhentheBalanceShifts 31
3 JumpingTogether 47
Part twO: mOtivating individUal PerfOrmance
4 It’sAllAbouttheWork 71
5 ValuesDriven,NotValuesDisplayed 87
6 It’sStillAboutPerformance 103
Part three: mObilizing OrganizatiOnal change
7 SettingtheFastZebrasFree 123
8 MeltingtheFrozenTundra 141
9 Mobilizing:ADifferentKindofManaging 155
10 WhattoDo 175
InConclusion 197
Contents
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viii contents
About Our Sources and Methodology 201A Diagnostic Tool: Assessing Your Organizational Quotient 209Notes 217Acknowledgments 223About the Authors 225Index 227
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1
Something strange was going on at the call center.It was one of those large open rooms, filled with cubicles, each
occupied by a service rep wearing a headset and answering cus-tomer calls. The scene seemed typical of such workplaces, except for one thing: A ten-foot-high wall, clad in purple fabric, cut straight through the center of the room, separating half of the service repre-sentatives from the other half.
We had been asked by our client, a senior executive at a health benefits provider, to look at this recently redesigned call center for best practices that could be applied in the company’s other call cen-ter locations.
Throughout the morning, the air had been filled with the steady murmur of voices as the reps calmly handled callers’ ques-tions with dispatch and efficiency. Around eleven o’clock, however, the sound of the voice coming from the cubicle closest to us, where a rep named Gloria sat, took on a new tone. Gloria’s responses grew hesitant, even a bit defensive. She would start to say something and then stop as if interrupted by the caller. At last she said, “Let me put you on hold for a moment. I need to ask a colleague about this. I will be right back.”
IntroductionLike Talking to a Wall
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2 leading outside the lines
Gloria punched the hold button, slipped off her headset, and walked to the purple wall. “Frank!” she yelled, her lips no more than six inches from the purple fabric. “Yo!” we heard a man’s voice reply-ing from the far side.
“I’ve got a caller with a question about COBRA payment for a laid-off worker’s partner,” Gloria called. “She wants to know if . . .” And Gloria went on with a detailed question. As soon as she was finished, Frank immediately called back the answer. “Got it,” Gloria said, hurried back to her cubicle, clamped on her headset, and picked up the call. “So, here’s the story,” she said to the caller, and in a moment the matter was resolved.
At her next break, we asked Gloria about the wall. “It’s ridicu-lous,” she said. “When the customer service organization was reor-ganized about six months ago, the wall was put up. The idea was to separate us into distinct teams to improve focus and efficiency. But we often have to interact across teams and sometimes shouting through the wall is the quickest way to get an answer.”
Over the course of three days of observation, we witnessed sev-eral more of these “through-the-wall” conversations. Later, when we brought up the issue of the wall with our client, he said it was news to him, even though he had been involved in the reorganization. Within a few weeks, the wall had been removed, the teams had been reintegrated, and the yelling had stopped.1
The Wall as an analogue
It’s rare to see a physical wall that is such a perfect analogue for an organizational wall. Most of the walls in companies of all kinds are intangible, invisible, and often unknown to senior management.
Although the call center wall seemed absurd, it had been erected for perfectly good and rational reasons that had to do with lines of business, reporting structures, and cost management. But the wall
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introduction 3
ended up getting in the way of real work that people had to do, so they found their own ways of getting around it.
To us, the wall represented the formal, hierarchical organiza-tion—the lines, if you will, that can be drawn to show the official relationships and power structures and workflows and channels of communication. The shouting through the wall represented the informal organization—the space, relationships, and behaviors that exist outside those formal lines.
It’s tempting to see one or the other—the formal or informal approach—as the right or the wrong way. The call center represen-tatives could certainly wonder what management had been think-ing when they restructured the organization and put up the wall between the teams. Management could shake their heads when they heard about employees working across organizational lines and yell-ing through the wall.
In most companies, the formal organization is still seen as the right approach, the default structure. Especially if you have been trained in the hard disciplines (finance, technology, or operations management) as so many senior leaders have, you tend to work most naturally through tangibles like job descriptions, organization charts, process flows, scorecards, and physical structures. There is nothing wrong in that. However, you may be less comfortable deal-ing with the fuzzier aspects of an organization (informal networks, cultural norms, emotional realities, and peer pressure) even if you recognize their importance. Leading outside the lines is harder than managing within the formal lines, partly because that territory is less well defined, less studied, and less written about.
Even so, the formal and informal organizations invariably find some way to coexist. For years the informal typically prevailed mostly in small organizations or “skunk works,” while in larger organiza-tions the formal tended to prevail. This will not be true much longer. In the current business environment—characterized by a rapid rate of change, increasing globalization, and the rise of Web-based social
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4 leading outside the lines
networks—more and more companies are finding that the best way to create lasting value is by nurturing all kinds of informal and non-hierarchical initiatives rather than by relying so heavily on formal top-down rules of engagement.
To make a shift toward the informal is not easy. It is, however, an effort that is really worth making. Increasingly, those companies that can mobilize the informal organization as effectively as they manage the formal—that is, integrate the two and achieve a balance of complementary benefits—are the companies that can create a real and sustainable competitive advantage. “The best of both” is the name of the game now.
Specifically, these organizations are ahead of the curve because they successfully accomplish more than one balancing act:
• They foster, encourage, and support deep values that inform the decisions and actions taken at all levels of the formal structure. However, their values are also evident in the informal attitudes, interactions, and behaviors of people throughout the organization.
• They ensure that formal, long-range strategy is understood rationally by people working on the front lines of the operation. However, they also provide emotional and visceral support, so the strategy permeates all aspects of the work.
• They retain the efficiency and clarity of the well-defined structures that define the formal organization while also capitalizing on the flexibility and speed of the social networks and peer interactions that connect people informally.
• They ensure that in addition to the formal methods of compensation and reward, including pay, benefits, bonuses, and well-defined forms of recognition, employees have emotional sources of motivation that commit them in ways that the formal mechanisms cannot.
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introduction 5
The origins of This Book
We have come to understand the formal and informal organizations through decades of research, client work, and personal experience spanning industries, sectors, and nations.
Jon Katzenbach (generally known as Katz) has advised orga-nizations for more than forty years, first at McKinsey & Company and then at his own firm, Katzenbach Partners (now part of Booz & Company). Katz has long been fascinated by team dynamics, how organizations function, and what motivates people and has written extensively about these topics in many articles and books, including his classic work, with Douglas Smith, The Wisdom of Teams.
Zia Khan joined the world of consulting after many years in academia. At Katzenbach Partners, he led several of the client engagements that led to the development of the ideas and method-ologies described in this book. Zia’s work focuses on the approaches and systems that drive strategy and improve organizational perfor-mance. He is currently vice president for strategy and evaluation at the Rockefeller Foundation.
So it has taken many years—and at least two epiphanies—for us to understand the ways of formal and informal organizations. Perhaps we were slow learners, but we sense we are not in a minority.
The first of the two epiphanies came over dinner one warm summer night in Montreal. That day we had engaged in a particu-larly interesting conversation with a senior vice president of strat-egy. His view was that the frontline workers in his company did not like the recent reorganization, and no matter how the formal structures were changed, kept right on acting and thinking as if the business were the same as it always had been.
Over dinner we talked about the issue of alignment at our cli-ent’s company. Was that the problem? We decided that it was, but not in quite the way we normally think about it. In reorganizations
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